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What’s the best way to teach children about financial literacy?

The following article represents the personal views of Cliff Weight and not necessarily those of ShareSoc.

I saw this interesting article in the FT: We need people to know the ABC of finance: facing up to the financial literacy crisis.

The article showed data on Responses to financial literacy questions around the world. An example: If you had $100 in a savings account and the annual interest rate was 2%, how much would be in the account after 5 years, more than $102, exactly $102, less than $102? 60% of Italian kids and 35% of US kids got this wrong.

The FT asked for comments on What’s the best way to teach children about financial literacy?

My suggestions:

  1. Set an objective of getting rich slowly.
  2. Start with an ISA. Dividends and capital gains are tax-free.
  3. Better still start with a LISA. The government gives you £100 for every £400 you save.
  4. Don’t put all your money in a cash ISA. Investing in cash is a poor long-term strategy. Invest in shares via an index tracker (ETF or Index Fund) with low fees or via a mutual fund or investment trust.
  5. If you want to have a bit of fun, buy a few shares as well as your funds. You will learn lots more about investing in this way.
  6. Don’t gamble. The odds of winning are very poor.
  7. Learn about what the FCA calls its regulatory perimeter. Recognise that if an “investment” is outside the FCA perimeter it is likely to be highly speculative and will not benefit from FCA oversight or FSCS protection.
  8. You cannot put Bitcoin and other crypto in an ISA, so you won’t get the tax benefits of an ISA.
  9. Read about successful investors like Warren Buffet. Read Lord Lee’s column in the FT. Read voraciously.
  10. View online tips on tik-tok and twitter with deep scepticism.
  11. Join ShareSoc, the UK individual investors society. Associate membership is free

It’s not a comprehensive list, but a sensible framework for instructing kids to the world of saving and investing.

Cliff Weight, Director, ShareSoc.

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